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Traders, cops and robbers

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Author Info

  • Anderson, James E.
  • Bandiera, Oriana

Abstract

Why does illegal trade often flourish without formal enforcement, but sometimes fail? Why do illegal trade-reducing policies often fail? Why do States often appear to tolerate illegal trade? A model of trade with cops and robbers provides answers. `Safety in numbers' is a key element: the equilibrium probability of successful shipments is increasing in trade volume. Even without conventional fixed costs, safety in numbers implies scale economies which can explain the absence or robustness of trade subject to predation. Spilling over between markets, safety in numbers implies that illegal trade can foster legal trade and State revenue.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 70 (2006)
Issue (Month): 1 (September)
Pages: 197-215

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Handle: RePEc:eee:inecon:v:70:y:2006:i:1:p:197-215

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Web page: http://www.elsevier.com/locate/inca/505552

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References

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  1. Marcouiller, Douglas & Young, Leslie, 1995. "The Black Hole of Graft: The Predatory State and the Informal Economy," American Economic Review, American Economic Association, vol. 85(3), pages 630-46, June.
  2. James E. Anderson & Douglas Marcouiller, S.J., 1999. "Insecurity and the Pattern of Trade: An Empirical Investigation," Boston College Working Papers in Economics 418, Boston College Department of Economics, revised 03 Aug 2000.
  3. Grossman, Herschel I. & Noh, Suk Jae, 1994. "Proprietary public finance and economic welfare," Journal of Public Economics, Elsevier, vol. 53(2), pages 187-204, February.
  4. Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo Group Munich.
  5. James E. Anderson & Leslie Young, 2002. "Imperfect Contract Enforcement," NBER Working Papers 8847, National Bureau of Economic Research, Inc.
  6. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, vol. 53(1), pages 1-27, February.
  7. James E. Anderson & Douglas Marcouiller, 2005. "Anarchy And Autarky: Endogenous Predation As A Barrier To Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 189-213, 02.
  8. Anderson, James E. & Marcouiller, S.J. Douglas, 1997. "Trade and Security, I: Anarchy," Working Paper Series 477, Research Institute of Industrial Economics.
  9. Grossman, Herschel I., 2002. ""Make us a king": anarchy, predation, and the state," European Journal of Political Economy, Elsevier, vol. 18(1), pages 31-46, March.
  10. Sah, R.K., 1990. "Social Osmosis And Patterns Of Crime: A Dynamic Economic Analysis," Papers 609, Yale - Economic Growth Center.
  11. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
  12. Neher, Philip A, 1978. "The Pure Theory of the Muggery," American Economic Review, American Economic Association, vol. 68(3), pages 437-45, June.
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Citations

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Cited by:
  1. James E. Anderson, 2005. "Economic Integration and the Civilizing Commerce Hypothesis," Boston College Working Papers in Economics 673, Boston College Department of Economics.
  2. Arghya Ghosh & Peter Robertson, 2012. "Trade and expropriation," Economic Theory, Springer, vol. 50(1), pages 169-191, May.
  3. James Anderson, 2009. "Does trade foster contract enforcement?," Economic Theory, Springer, vol. 41(1), pages 105-130, October.
  4. Stelios Michalopoulos & Alireza Naghavi & Giovanni Prarolo, 2010. "Trade and geography in the economic origins of Islam: theory and evidence," Center for Economic Research (RECent) 046, University of Modena and Reggio E., Dept. of Economics.
  5. Scott L. Baier & Gerald P. Dwyer, Jr. & Robert Tamura, 2004. "Factor returns, institutions, and geography: a view from trade," Working Paper 2004-17, Federal Reserve Bank of Atlanta.
  6. James E. Anderson, 2008. "Commercial Policy in a Predatory World," Boston College Working Papers in Economics 703, Boston College Department of Economics.
  7. James E. Anderson, 2008. "Terrorism, Trade and Public Policy," Boston College Working Papers in Economics 701, Boston College Department of Economics.
  8. Bensassi, Sami & Martínez-Zarzoso, Inmaculada, 2010. "How Costly is Modern Maritime Piracy for the International Community?," MPRA Paper 27134, University Library of Munich, Germany.
  9. Marcus Noland & Stephan Haggard, 2012. "Networks, Trust, and Trade: The Microeconomics of China–North Korea Integration," Working Paper Series WP12-8, Peterson Institute for International Economics.
  10. Anderson, James & Vesselovsky, Mykyta & Yotov, Yoto, 2014. "Gravity with Scale Economies," School of Economics Working Paper Series 2014-4, LeBow College of Business, Drexel University.

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